Motorists face costly fuel in January on global oil rally
A pump attendant fills a tank at a petrol station in Nyeri town on September 14, 2020.
Petroleum prices rose marginally this month based on November's global price, meaning motorists will face higher pump prices in January following a recent rally in crude prices.
The price of a litre of petrol has increased by Sh0.97 to Sh106.82 in Nairobi while those of diesel and kerosene have increased by Sh1.12 and Sh1.93 respectively to Sh91.82 and 83.56.
These will be the commodities' prices from December 15 to January 14.
Oil prices increased to the highest since March to hit the $50.36 per barrel on Friday, buoyed by hopes that more countries will soon roll out a coronavirus vaccine, accelerating economic growth and travel that will fuel demand for fuel.
This looks set to put pressure on pump prices in January when the energy regulator will review fuel prices.
State subsidy
But motorists are on course to enjoy a State subsidy on fuel after global crude cost rose above $50 per barrel, a level that allows diesel users to get rebates from the government.
The Ministry of Energy reckons that Kenyans will not bear costs of diesel prices above $50 a barrel in a subsidy scheme that excludes petrol.
The subsidy will be supported by billions of shillings raised from fuel consumers through the Petroleum Development Levy, which was increased to Sh5.40 a litre in July from Sh0.40, representing a 1,250 per cent increase.
Crude oil prices plunged after a fallout between Saudi Arabia and Russia over production cuts in the wake of the Covid-19 pandemic and depressed demand for energy on slowed economic activities.
Increased traffic
But reduced tension between the two, backed by increased road traffic in some of the world’s major cities in June, sparked a rally in crude oil prices.
Kenya quoted average crude prices in February at $56.10 and fell $17.64 in April before starting a marginal increase that saw it at $42 in October, which is the basis for the current pump prices.
The Kenya subsidy scheme is meant to cushion consumers from volatility in fuel prices but it will also see motorists lose out when paying the Sh5.40 for a litre at the pump.
Petroleum Cabinet Secretary John Munyes will determine the amount of subsidy fuel consumers will be offered when prices increase by large margins during the monthly reviews.
